It has been more than a year since the derivatives broker MF Global went bust because of a $6 billion bet on European sovereign debt that went wrong. For Australian clients it's been a frustrating and stressful wait to get their money back which only started coming through last month.

Transcript

TICKY FULLERTON, PRESENTER: It's been more than a year since the derivatives broker MF Global went bust because of a $6 billion bet on European sovereign debt that went all wrong.

For Australian clients it's been a frustrating and stressful wait to get their money back, which only started coming through last month.

Victims of the surprise collapse said it exposes major holes in Australia's regulatory framework, so they're now sending their money offshore.

Neal Woolrich reports.

NEAL WOOLRICH, REPORTER: It was the financial collapse that had Wall Street buzzing last October.

???: The $6.3 billion position existed in MF, a primary dealer no less! Why did the August issuance of $300 million in new paper from that company not disclose that?

NEAL WOOLRICH: MF Global was one of the world's biggest derivatives traders, allowing clients to buy and sell instruments like futures, options and contracts for difference. But it went under after it bet $6 billion the wrong way on the bonds of troubled European nations like Portugal, Italy and Spain.

Australian investors had $310 million in the local MF Global operation, but were soon in for a rude shock.

ANDREW PERROTT, MF GLOBAL CLIENT: I wasn't expecting MF Global to go bankrupt, and even in that event, I was expecting the accounts to be transferred to another broker.

MICHAEL COX, MF GLOBAL CLIENT: It really has taken its toll the longer it's gone on. I had some money available to me when they went under, but certainly not enough to last a year.

NEAL WOOLRICH: Michael Cox had a seven-figure sum invested with MF Global when it went under and three young children. He's since received just over half of his money back, but it took until October this year for the money to start flowing.

MICHAEL COX: I've previously been through a bankruptcy with Refco and we received our segregated funds without any concern whatsoever. So in that respect I was probably a little overconfident in my position, but I've certainly learnt the hard way.

NEAL WOOLRICH: Andrew Perrott considers himself one of the lucky ones, having moved most of his money to other brokers in the weeks before MF Global collapsed. He says the episode shows Australia's customer protections aren't strong enough so he's setting up his own trading company in Canada.

ANDREW PERROTT: And that's simply because the Canadian system has been tested twice and in both instances clients received 100 per cent of their funds within a few weeks and that is due to the presence of a deposit insurance.

NEAL WOOLRICH: The liquidator, Deloitte's Chris Campbell, says $200 million has now been returned to clients and he hopes to eventually deliver more than 90 cents in the dollar. He says client money was segregated from MF Global's own funds and that shows consumer protections are working in Australia.

However, MF Global exploited a loophole allowing them to use money in client's accounts as collateral for some transactions, putting client money at risk and that deficiency in the law still exists today.

MICHAEL COX: It's clearly woeful. While Australia isn't unique in that respect, I certainly wouldn't be opening another account here in Australia until ASIC show some capacity to improve the legislation.

NEAL WOOLRICH: Deloitte's Chris Campbell says the work done in this case may set a precedent for future situations and help extradite the wind-up of failed firms.

But Andrew Perrott and Michael Cox agree this will taint Australia's reputation and put a dent in any hopes we may become a financial services hub.